A spike in gold prices has been followed by the release of the US March CPI data, pushing it to $1,975 resistance as discussed in Monday’s weekly letter. Higher-than-expected inflation expectations will continue to support gold, even if Core CPI growth slows. Gold is likely to benefit from a moderate Core CPI reading. Inflation in the headlines rose to 8.5%. A big number of gold traders feel that inflation is not going to be transitory, despite recent rises in US consumer prices and substantial y/y increases in the majority of component prices. Real interest rates, a critical factor in determining gold price levels, may not rise as rapidly as core inflation does. 

Since support has held since $1,920, gold is expected to trade higher, with $1,975 acting as initial resistance. The monthly gold chart below depicts ascending broadening patterns with the formation of a double bottom. For the last six months, we’ve designated $1,920 as an important level. This level was tested in April and the next rally is underway. The month of March ended in $1,920, but the candle cast a long shadow which is a risk parameter for short-term traders. We expected consolidations between $1,920 and $1,975 on weekly and daily charts, whereby prices are fluctuating in wide ranges. Similarly, silver has risen to $25.75, as expected, and is now waiting for confirmation.

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